Kpmg LLP v. Cocchi

Cite as: 565 U. S. ____ (2011) 1
Per Curiam
SUPREME COURT OF THE UNITED STATES
KPMG LLP v. ROBERT COCCHI ET AL.
ON PETITION FOR WRIT OF CERTIORARI TO THE DISTRICT
COURT OF APPEAL OF FLORIDA, FOURTH DISTRICT
No. 10–1521. Decided November 7, 2011
PER CURIAM.
Agreements to arbitrate that fall within the scope and
coverage of the Federal Arbitration Act (Act), 9 U.S. C. §1
et seq., must be enforced in state and federal courts. State
courts, then, “have a prominent role to play as enforcers
of agreements to arbitrate.” Vaden v. Discover Bank, 556
U.S. 49, 59 (2009).
The Act has been interpreted to require that if a dispute
presents multiple claims, some arbitrable and some not,
the former must be sent to arbitration even if this will
lead to piecemeal litigation. See Dean Witter Reynolds
Inc. v. Byrd, 470 U.S. 213, 217 (1985). From this it fol-
lows that state and federal courts must examine with care
the complaints seeking to invoke their jurisdiction in order
to separate arbitrable from nonarbitrable claims. A court
may not issue a blanket refusal to compel arbitration
merely on the grounds that some of the claims could be
resolved by the court without arbitration. See ibid.
In this case the Fourth District Court of Appeal of the
State of Florida upheld a trial court’s refusal to compel
arbitration of respondents’ claims after determining that
two of the four claims in a complaint were nonarbitrable.
Though the matter is not altogether free from doubt, a fair
reading of the opinion indicates a likelihood that the Court
of Appeal failed to determine whether the other two claims
in the complaint were arbitrable. For this reason, the
judgment of the Court of Appeal is vacated, and the case
remanded for further proceedings.
2 KPMG LLP v. COCCHI
Per Curiam
* * *
Respondents are 19 individuals and entities who bought
limited partnership interests in one of three limited part-
nerships, all known as the Rye Funds. The Rye Funds
were managed by Tremont Group Holding, Inc., and
Tremont Partners, Inc., both of which were audited by
KPMG. The Rye Funds were invested with financier
Bernard Madoff and allegedly lost millions of dollars as a
result of a scheme to defraud. Respondents sued the Rye
Funds, the Tremont defendants, and Tremont’s auditing
firm, KPMG.
Only the claims against KPMG are at issue in this case.
Against KPMG, respondents alleged four causes of action:
negligent misrepresentation; violation of the Florida De-
ceptive and Unfair Trade Practices Act (FDUTPA), Fla.
Stat. 501.201 et seq. (2010); professional malpractice; and
aiding and abetting a breach of fiduciary duty. Respond-
ents’ basic theory was that KPMG failed to use proper
auditing standards with respect to the financial state-
ments of the partnerships. These improper audits, re-
spondents contend, led to “substantial misrepresentations”
about the health of the funds and resulted in respondents’
investment losses. 51 So. 3d 1165, 1168 (Fla. App. 2010).
KPMG moved to compel arbitration based on the audit
services agreement that existed between it and the Trem-
ont defendants. That agreement provided that “[a]ny
dispute or claim arising out of or relating to . . . the ser-
vices provided [by KPMG] . . . (including any dispute or
claim involving any person or entity for whose benefit the
services in question are or were provided) shall be re-
solved” either by mediation or arbitration. App. to Pet. for
Cert. 63a. The Florida Circuit Court of the Fifteenth
Judicial Circuit Palm Beach County denied the motion.
The Court of Appeal affirmed, noting that “[n]one of the
plaintiffs . . . expressly assented in any fashion to [the
audit services agreement] or the arbitration provision.” 51
Cite as: 565 U. S. ____ (2011) 3
Per Curiam
So. 3d, at 1168. Thus, the court found, the arbitration
clause could only be enforced if respondents’ claims were
derivative in that they arose from the services KPMG
performed for the Tremont defendants pursuant to the
audit services agreement. Applying Delaware law, which
both parties agreed was applicable, the Court of Appeal
concluded that the negligent misrepresentation and the
violation of FDUTPA claims were direct rather than de-
rivative. A fair reading of the opinion reveals nothing to
suggest that the court came to the same conclusion about
the professional malpractice and breach of fiduciary duty
claims. Indeed, the court said nothing about those claims
at all. Finding “the arbitral agreement upon which KPMG
relied would not apply to the direct claims made by the
individual plaintiffs,” id., at 1167, the Court of Appeal
affirmed the trial court’s denial of the motion to arbitrate.
Respondents have since amended their complaint to
add a fifth claim. Citing the Court of Appeal’s decision,
the trial court again denied KPMG’s motion to compel
arbitration.
The Federal Arbitration Act reflects an “emphatic fed-
eral policy in favor of arbitral dispute resolution.”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 631 (1985); Moses H. Cone Memorial Hospi-
tal v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)
(noting that “questions of arbitrability [must]. . . be ad-
dressed with a healthy regard for the federal policy favor-
ing arbitration”). This policy, as contained within the Act,
“requires courts to enforce the bargain of the parties to
arbitrate,” Dean Witter, supra, at 217, and “cannot possi-
bly require the disregard of state law permitting arbitra-
tion by or against nonparties to the written arbitration
agreement,” Arthur Andersen LLP v. Carlisle, 556 U.S.
624, 630, n. 5 (2009) (emphasis deleted). Both parties
agree that whether the claims in the complaint are arbi-
trable turns on the question whether they must be deemed
4 KPMG LLP v. COCCHI
Per Curiam
direct or derivative under Delaware law. That question of
state law is not at issue here. What is at issue is the
Court of Appeal’s apparent refusal to compel arbitration
on any of the four claims based solely on a finding that two
of them, the claim of negligent misrepresentation and the
alleged violation of the FDUTPA, were nonarbitrable.
In Dean Witter, the Court noted that the Act “provides
that written agreements to arbitrate controversies arising
out of an existing contract ‘shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.’ ” 470 U.S., at
218 (quoting 9 U.S. C. §2). The Court found that by its
terms, “the Act leaves no place for the exercise of discre-
tion by a district court, but instead mandates that district
courts shall direct the parties to proceed to arbitration on
issues as to which an arbitration agreement has been
signed.” 470 U.S., at 218 (emphasis in original). Thus,
when a complaint contains both arbitrable and nonarbi-
trable claims, the Act requires courts to “compel arbitra-
tion of pendent arbitrable claims when one of the parties
files a motion to compel, even where the result would be
the possibly inefficient maintenance of separate proceed-
ings in different forums.” Id., at 217. To implement this
holding, courts must examine a complaint with care to
assess whether any individual claim must be arbitrated.
The failure to do so is subject to immediate review. See
Southland Corp. v. Keating, 465 U.S. 1, 6–7 (1984).
The Court of Appeal listed all four claims, found that
two were direct, and then refused to compel arbitration on
the complaint as a whole because the arbitral agreement
“would not apply to the direct claims.” 51 So. 3d, at 1167.
By not addressing the other two claims in the complaint,
the Court of Appeal failed to give effect to the plain mean-
ing of the Act and to the holding of Dean Witter. The
petition for certiorari is granted. The judgment of the
Court of Appeal is vacated, and the case is remanded. On
Cite as: 565 U. S. ____ (2011) 5
Per Curiam
remand, the Court of Appeal should examine the re-
maining two claims to determine whether either requires
arbitration.
It is so ordered.